Socially Responsible Investing and Factor Investing, Is There an Opportunity Cost?

Cai, Li; Cooper, Ricky; He, Di

doi:10.3905/jpm.2021.1.307

Cited by 4 publications

(4 citation statements)

References 36 publications

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“…In a similar vein, Cai et al (2021) found virtually no degradation in performance or turnover costs when excluding companies with bad ESG scores, even if there are severe risk-induced performance and high transaction issues when the screening selection becomes more radical only for companies that are ESG-forward. Nevertheless, they concluded that outcomes largely diverge for the method of implementing ESG.…”

Section: Market Performancementioning

confidence: 86%

“…Alessandrini and Jondeau (2020) reported results for portfolio outcomes connected to ESG investing, finding that ESG screening can substantially improve ESG scores for both otherwise passive and smart beta portfolios without reducing risk‐adjusted returns, even if an aggressive exclusion may have some effect also in risk exposures. In a similar vein, Cai et al (2021) found virtually no degradation in performance or turnover costs when excluding companies with bad ESG scores, even if there are severe risk‐induced performance and high transaction issues when the screening selection becomes more radical only for companies that are ESG‐forward. Nevertheless, they concluded that outcomes largely diverge for the method of implementing ESG.…”

Section: Thematic and Content Analysismentioning

confidence: 90%

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Anatomy of the chimera: Environmental, Social, and Governance ratings beyond the myth

Lucarelli,

Severini

2024

Bus Strat Env

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Environmental, Social, and Governance (ESG) ratings were developed to account for the multidimensional nature of the sustainability of firms. Research on ESG ratings suggests that working towards sustainability means engaging in a utopian effort, as in the chimera myth. We developed a conceptual framework of corporate activities that guides a systematic literature review based on 79 papers. Our analysis confirms that ESG ratings remain a black box, explored mainly from a purely monetary perspective and with contradictions on value created for companies and collective well‐being. Therefore, we deduce that research is still “chasing a chimera,” being this incomplete knowledge due to divergences in (1) theories, (2) regulations, (3) geographic and (4) corporate culture, (5) constructs/metrics, and (6) corporate attitude towards disclosure. Consequently, we identify research gaps and avenues for future research to foster corporations' responsible behaviours and socially responsible investing.

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Section: Market Performancementioning

confidence: 86%

Section: Thematic and Content Analysismentioning

confidence: 90%

Anatomy of the chimera: Environmental, Social, and Governance ratings beyond the myth

Lucarelli,

Severini

2024

Bus Strat Env

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“…ESG responsibility helps companies build their social reputation, and reputation as a unique intangible resource helps companies build a competitive advantage, which leads to improved financial performance and excess profits [29,30]. At the same time, the ESG responsibility of industrial companies will focus on and protect the interests of stakeholders upstream and downstream of the supply chain, which not only makes the company's transaction costs lower but also attracts more partners [31][32][33][34].…”

Section: Promotion Effect Of Industrial Enterprises' Esg Responsibili...mentioning

confidence: 99%

Bilateral Effects of ESG Responsibility Fulfillment of Industrial Companies on Green Innovation

et al. 2023

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This paper theoretically analyzes the bilateral mechanism of ESG responsibility fulfillment on green innovation of industrial enterprises and decomposes the promotion effect, inhibition effect and the net effect of mutual influence of ESG responsibility fulfillment on green innovation of Chinese industrial enterprises based on the data of 615 industrial enterprises in China from 2012 to 2021, and it analyzes the regular characteristics of them using bilateral stochastic frontier model. The study shows that (1) ESG responsibility fulfillment can drive green innovation in industrial enterprises. The interaction between the facilitation effect (24.49%) and the inhibiting effect (20.71%) of ESG responsibility fulfillment in industrial enterprises eventually leads to the actual green innovation level being higher than the frontier green innovation level by 3.78%. (2) The driving effect of ESG responsibility on green innovation of industrial enterprises has room for growth; the driving effect of ESG on green innovation gradually increases and turns from negative to positive with the improvement of ESG performance; and the net effect of ESG responsibility on the level of green innovation of industrial enterprises from 2012 to 2020 shows a continuous growth. (3) The driving effect of industrial enterprises’ ESG responsibility fulfillment on green innovation is the highest in the western region, followed by the eastern region, and it is the lowest in the central region. (4) Compared with industrial enterprises in regions with high managerial short-sightedness, non-heavy pollution and low marketization, the driving effect of ESG responsibility fulfillment on green innovation of industrial enterprises in regions with low managerial short-sightedness, heavy pollution and high marketization is stronger.

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“…The literature does reveal that positive screening and negative screening are not mutually exclusive, and can be combined (e.g. Cai et al, 2021;Derwall et al, 2011;Statman and Glushkov, 2009;Verheyden et al, 2016). In practice, the combined use of negative screening and positive screening is very common (Leite and Cortez, 2015).…”

Section: Rr2mentioning

confidence: 99%

Implementing corporate sustainability information in socially responsible investing: a systematic review of empirical research

Daugaard

Jia

2023

JAL

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PurposeThis study aims to provide a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack of a recognised body of knowledge on this issue. This study, therefore, collates and reviews relevant studies (67 studies) to provide guidance to investors interested in SRI and identify a research agenda for academics desiring to contribute to this area.Design/methodology/approachThis study conducts a systemic literature review employing recognised key words and searching the Web of Science. HistCite is utilised to ensure important cited studies are not missed from the collection. The review was conducted from two perspectives: (1) sources of sustainability information and (2) how the information is used in SRI.FindingsThe review identifies five major sources of sustainability information, including corporate reports, ESG ratings, industry affiliation, news and private communication with firms. These sources of information play different roles in the cross section of SRI strategies (i.e. negative and positive screening, active ownership and integration). This study provides guidance on how to use this information in SRI and provides recommendations for future research on how analysts interact with the information, how different informational characteristics impact implementation, ways to improve data quality, improvements to analysis methods and where data use needs to be extended into new strategies.Originality/valueThis review contributes to the SRI literature by inventorying studies of an important, yet omitted aspect, namely, sustainability information. This work also enriches the literature on corporate sustainability information by investigating how this information can be used for a specific purpose, namely, SRI. Given the increasing interest in SRI, this review will provide much-needed guidance for a range of practitioners, including investors and regulators.

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Socially Responsible Investing and Factor Investing, Is There an Opportunity Cost?

Cited by 4 publications

References 36 publications

Anatomy of the chimera: Environmental, Social, and Governance ratings beyond the myth

Anatomy of the chimera: Environmental, Social, and Governance ratings beyond the myth

Bilateral Effects of ESG Responsibility Fulfillment of Industrial Companies on Green Innovation

Implementing corporate sustainability information in socially responsible investing: a systematic review of empirical research

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